The strength of European brands lies in their Anatomy of Growth

There were increasing fears that after Britain's "Brexit" vote in June, political uncertainty would lead businesses to the brink, and that the surprise majority vote was the harbinger of the European Union’s demise. But business across the 19 Eurozone economies grew in October at its fastest pace so far this year, according to a survey by research firm IHS Markit. Furthermore, Interbrand’s 2016 Best Global Brands report confirms this positive trend, revealing that across the various sectors, European brands are at their best.

In fact, this year, the European brands among the global Top 100 tell a collective story of business growth across all industries. This is due to their robust understanding of how to build and maintain a strong brand, and continually investing in its growth.

While US brands often dominate the global conversation—and certainly, this year, they continue to demonstrate huge success, particularly the tech brands—European brands are making important and steady gains. Out of the 100 most valuable global brands, 35 are European and 26 of these brands have achieved growth for their businesses in 2016. Together, the 35 European brands represent USD $412,657 billion, which is 23 percent of the total value of all Best Global Brands and a 9 percent increase from 2015.

In terms of the top growing brands, four of the ten Top Growing Best Global Brands come from Europe: LEGO, Zara, Mercedes-Benz, and Porsche. In fact, more than half of the global brands that have achieved double digit-growth in 2016 are European-based businesses, including automotive brands MINI, Audi, BMW, and Land Rover; luxury brand Hermès, sporting goods powerhouse adidas, financial services brands AXA and Allianz, technology brand SAP, and diversified services brand Siemens.

This shows that our global brand landscape today would not be complete without the value that European brands bring to it. Great European brands from diverse sectors create value and bring remarkable stories of success, growth, and innovation. The results provided by strong European brands reflect that they don’t just illustrate a point-in-time solid measurement of value, but rather that they create internal alignment, and focus on the actions required to grow their brands and their businesses.

And how do they do so? There are three common key features amongst the European brands that generate growth not only in brand value, but also in business value, which often make European brands the example to be followed by other global brands.

1. A clear strategy for growth, to start with, as shown by those such as the Danish brand, LEGO. The third top growing global brand this year, LEGO does not rest on the merits of its signature brick toys, loved for generations. Rather, it innovates around the notion of individual creativity, encouraging children (and adventurous adults!) to explore, experience, and express their own world—a world without limits. LEGO’s success story stems from its own disruptive thinking about how a toy brand can grow beyond the product itself. Steadily and boldly moving from bricks to clicks (digital), LEGO has partnered with multiple brands such as Disney and has become a global, cross-generational Furthermore, quality and outstanding client service, hallmarks of the LEGO brand since its inception, reflect that only the best is good enough.

European luxury brands, representing 92 percent of all luxury brand value among the Best Global Brands, demonstrate a unique but fascinating growth strategy, worth paying attention to. While this year marks the “luxury reset,” many luxury brands having experienced a drop in brand value, others are more clearly demonstrating the pay-off strategy of sustainable growth through authenticity, purpose, and commitment—all hallmarks of brand strength, regardless of sector.   

Dior enters the Top 100 for the first time this year, and Gucci has recovered from notable challenges to achieve positive growth. At the meta-luxury level, where the standout this year is Hermès, with a 17 percent rise in brand value, we see how these European brands understand the importance of sustainable growth. Rebecca Robins, Interbrand Global Director and co-author of Meta-luxury: Brands and the culture of excellence, explained recently in Harper’s Bazaar UK what these brands teach us amidst the larger luxury reset:

[…] meta-luxury brands grow through both uncompromising commitment to excellence and limitation. They make decisions around extension and expansion, based on the long-term protection of the brand and health of the business. This is in sharp contrast to many brands that have fallen foul by chasing the immediate gratification of fast profits at the expense of sustainable growth initiatives, leading to brand dilution and value erosion in the long term. The guiding principles of meta-luxury brands will ultimately limit decisions around where the brand should go—and, crucially, not go—and yet, that very integrity is the long-term economic engine.

While luxury brands adjust their business strategies to these rigorous criteria for expansion, they also work to drive value from any touchpoint where the brand may be experienced, to the entire ecosystem in which they participate. This is what these brands are focusing their growth strategies on, and how they will continue to build strength—by translating their stories of excellence within a knowledge and experience economy that craves micro-moments and memories as much as the product itself.

2. European brands and businesses, while assumed to be more conservative than American brands, are demonstrating their disruptive prowess in how they are embracing—and often leading—the global phenomenon of the blurring of traditional sectors, another important key to their successful growth. Multidimensional brand growth is led by an understanding of a brand’s own barriers versus its category norm, and these barriers become, on one hand, a measure of limitations, but on the other, the barometer for potential. This is especially the case in the automotive industry, the fastest growing European sector. European automotive represents 82 percent of the total brand value of the 2016 Best Global Brands automotive sector, and this is due in overwhelming majority to German brands Mercedes-Benz, Audi, Volkswagen, Porsche, and MINI. (MINI, of course, is built on British heritage, and Land Rover also has an excellent story of double-digit brand growth this year.) The average brand value growth among these Best Global Brands is 12 percent this year. German brands especially stand out, as cars are becoming increasingly much more than a means of transport, but rather the technical device for each individual person’s specific mobility needs, or the center of their mecosystems.

Another excellent example is how these automotive brands are building out, instead of shying away from, car sharing platforms; they are sharing their massive behind-the-scenes technological innovation to provide these newer brands with the assurance of much higher quality and user experience. Mercedes-Benz is partnering with CAR2GO to offer electric SMARTs; in Germany the Car2Go Black by Mercedes is already betting strongly on rewarding those club members who pay per use, rather than own their own cars. BMW is partnering with DriveNow, Volkswagen with Quicar—and this is just the beginning.

3. Strong brands grow through cohesiveness and customer-centricity, areas in which European brands lead. This translates into expertise, knowhow, and close attention to defending authenticity and their foundational brand essence, resulting in higher quality standards and exceptional experiences, tailored to the customer’s needs. MercedesBenz is also, unsurprisingly, a clear example of this. The “Mercedes ME stores” represent the height of their customers’ brand experience. Mercedes distances itself from the car dealership concept and aims to be the central place to discover its innovations, engage with the brand, and enjoy the gastronomic and cultural offers that enhance the customer’s lifestyle.

Legacy and disruption: European brands’ dual powers

It is no surprise that European brands have the unrivaled competitive edge of historic legacy, but what is essential to understand is how they couple this power with proactive disruption. Many European brands are centenary. For instance, BMW is just celebrating its first one hundred years and has already publicly announced how the brand envisions the next one hundred. As a result, most of the European Best Global Brands have invented and reinvented themselves multiple times. These brands, more than any others worldwide, must understand the truth that we are all, always, in beta. They have navigated through complex times, being a key part of the history of Europe in the twentieth century. They have opened new markets, they have blazed the trail and showed the way for other brands to follow. They “keep walking” as Johnnie Walker proclaims, to grow, evolve, and become what they are today. Mercedes-Benz, once again, is a clear example of how a brand with a historic legacy has reinvented itself with a strategy for brand and business growth. It is the only European brand amongst the Top 10 Best Global Brands, achieving 18 percent brand growth during 2016. Beyond its image of excellence, premium appeal, and legacy based on the motto “The Best or Nothing” (which resonates with LEGO’s brand philosophy), Mercedes-Benz invests in creating innovative, interactive experiences accessible to more than the current potential customer. This not only engenders loyalty amongst their clients but also, importantly, spurs interest among the future generation of buyers, especially in Europe and in Asia.

We should no less look to the newer European Best Global Brands. In fact, they demonstrate the inverse of this dual-power phenomenon: They show how disruptive brands stay agile and relevant while growing toward the stature of legacy brands. Here, Spanish brand Zara and Swedish brands IKEA are the best examples. What have these two brands done to achieve sustainable growth over the years? They simply challenge the status quo perpetuated by traditional and established brands and change it, which translates into being completely understood and loved by their customers and key audiences all around the world.

People go to IKEA not only because it is more affordable, but because it offers a wide range of solutions that can be easily adapted. IKEA has taken the legacy and tradition of Swedish and Nordic design and globalized it. IKEA has developed some of the most iconic furniture in the last 25 years, and people understand that they do not only offer products and services, but also an entire family shopping experience, around their brand.

Zara, which started with the important growth strategy of borrowing from the best, was born of the bold idea at the time of prioritizing investment in location and in displaying their shop windows stunningly, when this was only done in European capitals (such as Paris) outside of Spain. Zara’s founder was spot on in making his fashion brand a democratic luxury, which is excellent value for money and is produced with a pairing of speed and quality unrivaled by its competitors to this day. Now, it is the retail leader in not only a state-of-the art, one-of-a-kind global logistics system, but in being the first to introduce mobile payments in all of its stores. Zara, achieving 19 percent brand growth this year, is no doubt one of the breakthrough digital retailers among the Best Global Brands worldwide.

Consistently, European brands demonstrate excellence and leadership. They bet strongly on global markets, have achieved critical mass, and built strong brands which act as motors and provide seamless customer experiences to the world. This said, brands in Europe need to keep innovating to stay ahead, as the competitive landscape is becoming more complex, with new challengers coming not only from the US, but from Asia and Latin America. The resources allocated to managing brands will be key and more important to the way these businesses sustain growth over time. To do that, European brands will need to invest more in marketing capabilities and processes that ensure alignment across regions, while providing enough flexibility to adapt to local needs and market changes. In other words, they must continue to deploy a cohesive, multidimensional brand growth strategy including people, processes, and platforms, with the customer always at the core. If European brands continue to demonstrate this unified leadership, building their strength for the long term, they will continue to lead the way for brand and business growth worldwide.

To read the German language version, published by Global Investor: CLICK HERE

To read in French: CLICK HERE 
To read in Spanish: CLICK HERE

Chief Executive Officer, EMEA & LatAm